Malaysian Maverick: Mahathir Mohamad in Turbulent Times Page 17

  With the high-flying Malay champions chosen for privatized projects toppling during the Asian economic crisis, attempts to create a credible bumiputra commercial and industrial community all but collapsed. By 2000, the government had majority ownership of seven of the ten largest companies listed on Bursa Malaysia, "an indication of the failure of privatization". Among them were the two largest local banks, two privatized utility companies, a shipping line and a gas producer. The three other companies were Chinese owned. None was owned by a Malay.[105] The one Malay who made the top ten in Forbes's first Malaysian rich list in 2006, Syed Mokhtar Albukhary, was a relative late-comer, a businessman who had dallied with Anwar and in whom Dr. Mahathir invested heavily after becoming disillusioned with Daim Zainuddin's protégés.[106]

  Some economists argued that affirmative action as a means to redistribute wealth more equitably hindered growth and competitiveness, citing Malaysia's relative decline in the East Asian region: When the NEP was introduced in 1971, Malaysia ranked third only to Japan and Singapore in terms of GDP per capita; by 1990, it had fallen behind South Korea, Taiwan and Hong Kong as well.[107] And the gap continued to widen, despite Dr. Mahathir's denials, leaving Malaysia scrambling to compete in a globalized world, where China and India were setting a sizzling pace.

  Malaysia's population, at more than 23 million in 2003, had almost doubled since 1981 while simultaneously being urbanized and ethnically reconfigured. The portion designated urban swelled from just over one-third to almost two-thirds. Responding to incentives offered when Dr. Mahathir set his 70-million goal, the birthrate defied established international patterns and did not decline as prosperity increased. Malaysia became one of the youngest countries in the region, the envy of others saddled with geriatric liabilities. The Malay birthrate was double that of Chinese and Indians, for Malay families could count on scholarships and jobs for their children as well as tax breaks for more than two kids.[108] Constituting less than half the population in 1981, Malays became a clear and growing majority, without the need to be grouped among bumiputras to achieve national majority status.[109] For non-Malays, minorities lacking political power and shrinking further, the prospect of being demographically marginalized at some point, however distant, fostered a degree of unease.[110]

  Although the rest of the country had learned to live with affirmative action, there were clear limits as to how much the NEP and its subsequent variants could help ensure stability and foster national integration. Prosperity contributed to a general satisfaction that crossed ethnic lines. New urban residential developments were ethnically diverse, in contrast with the old racially homogeneous suburbs. The rows of trendy restaurants in Kuala Lumpur's Bangsar neighbourhood, along with the ubiquitous McDonalds, Pizza Hut and KFC fast-food outlets, dispensed officially certified halal fare, acceptable to Muslims, as the eateries catered to every race. A mass consumption culture, common to all groups, appeared to be "the most Malaysianizing of all forces".[111]

  Yet ethnic cleavages could not be wholly suppressed by rampant consumerism and rising class consciousness alone. While there was no repeat of the 1969 savagery, small-scale violence, mostly directed against Indians, occurred near the turn of the century. In the worst incident, in March 2001, six people were killed and 37 injured in Kampung Medan, a crowded squatter area near Kuala Lumpur plagued by poverty, crime and substance abuse.

  Disturbingly, ethnicity became entrenched as the basis for public assistance, even as it inadvertently promoted inequality within the favoured community and disenfranchised outsiders. Critics worried, too, that what was originally intended as a temporary measure was, over time, creating a culture of dependency that would defeat the very purpose of affirmative action: making the Malays competitive. Dr. Mahathir joined the chorus warning against a "crutch mentality".

  Contradictions abounded in the idea of assisting one ethnic group while trying to build unity and a national identity. Official policies produced unintended results, such as the formation of ethnic enclaves in Malaysian society. In the most glaring example, preferential hiring converted the civil service, reasonably ethnically diverse previously, into a wholly Malay preserve.[112] At the time of Dr. Mahathir's retirement, the country generally enjoyed peace, stability and unprecedented affluence, but his Bangsa Malaysia, a "fully united and ethnically integrated Malaysian nation", remained elusive.

  Notes

  Bank Negara Malaysia, percentage GDP growth: 1982, 6.0; 1983, 6.2; 1984, 7.8; 1985, -1.1; 1986, 1.2; 1987, 5.4; 1988, 9.9; 1989, 9.1; 1990, 9.0; 1991, 9.5; 1992, 8.9; 1993, 9.9; 1994, 9.2; 1995, 9.8; 1996, 10.0; 1997, 7.5; 1998, -7.5; 1999, 6.1; 2000, 8.5; 2001, 0.3; 2002, 4.1; 2003, 5.2.

  The East Asian Miracle: Economic Growth and Public Policy (New York: Oxford University Press, 1993).

  Bank Negara Malaysia, percentage GDP growth: 1970, 5.0; 1971, 10; 1972, 9.4; 1973, 11.7; 1974, 8.3; 1975, 0.8; 1976, 11.6; 1977, 7.8; 1978, 6.7; 1979, 9.3.

  Lee Hwok Aun, "The NEP, Vision 2020, and Dr. Mahathir: Continuing Dilemmas", in Bridget Welsh, ed., Reflections: The Mahathir Years (Washington: Southeast Asia Studies Program, The Paul H. Nitze School of Advanced International Studies, Johns Hopkins University, 2004), p. 274.

  Ibid., p. 274.

  The idea of a mental revolusi, mental revolution, dates to the late 1960s, and is identified with Senu Abdul Rahman, a former cabinet minister and UMNO strategist.

  Mahathir Mohamad, speech at UMNO General Assembly, 8 November 1991.

  Ozay Mehmet, "Mahathir, Ataturk and Development", in The Mahathir Era (Subang Jaya: International Investment Consultants, undated), p. 38.

  Carolyn Hong, "Muslims First, Malaysians Second", Straits Times, 21 August 2006.

  Khoo Boo Teik, Paradoxes of Mahathirism: An Intellectual Biography of Mahathir Mohamad (Kuala Lumpur: Oxford University Press, 1995), p. 17.

  Interview with Mahathir Mohamad, 20 March 2007.

  K. Das, "Mahathir's 'Restoration'", Far Eastern Economic Review, 11 June 1982, p. 38.

  Dr. Mahathir Mohamad, "Malaysia: The Way Forward", in Ahmad Sarji Abdul Hamid, ed., Malaysia's Vision 2020: Understanding the Concept, Implications and Challenges (Petaling Jaya: Pelanduk Publications (M) Sdn. Bhd., 1997 edition), p.404.

  Lorraine Carlos Salazar, "'First Come, First Served': Privatization Under Mahathir", in Reflections, p. 283, citing Radin Soenarno Al Haj and Zainal Aznam Yusof, "The Experience of Malaysia", in "Privatization: Policies, Methods and Procedures" (Manila: Asian Development Bank, 1985).

  Excerpts from transcript of the dialogue with members of parliament, cabinet ministers and scholars in Syria in August 2003, published in New Straits Times, 20 August 2003, pp. 12, 14 cited in Patricia Martinez, "Perhaps He Deserved Better: The Disjuncture between Vision and Reality in Mahathir's Islam", in Reflections, p. 29.

  "Dr M on Current Issues in Malaysian Politics", 11 May 2006, http://www.malaysiakini.com/news/50970 (accessed 27 May 2006).

  Fauwaz Abdul Aziz, "Mahathir Vents Frustration on DVD", 11 May 2006, http://www.malaysiakini.com/news/50965 (accessed 27 May 2006).

  Interview with Mahathir Mohamad, 20 March 2007.

  Greg Felker, "Mahathir and the Politics of Economic Policy in Malaysia", in Reflections, p. 264.

  Interview with Mahathir Mohamad, 20 March 2007.

  Interview with Daim Zainuddin, 18 October 2007.

  Interview with Mahathir Mohamad, 14 August 2007.

  Cheong Mei Sui and Adibah Amin, Daim: The Man Behind the Enigma (Petaling Jaya: Pelanduk Publications (M) Sdn. Bhd., 1995), p. 84.

  Raphael Pura, "Malaysia's Daim Tied to Private Bank Deal", Asian Wall Street Journal, 30 April 1986.

  Raphael Pura, "Pernas Will Buy Daim Stake in Malaysian Bank", Asian Wall Street Journal, 6 October 1986.

  Lee Poh Ping, "The Look East Policy, the Japanese Model, and Malaysia", in Reflections, p. 321.

  Khadijah Md. Khalid, "Malaysia-Japan Relations under Mahathir: 'Turning Japanese'?", in Reflections, p. 328.

  Raphael Pura, "Malays
ia's Vague Campaign to Learn from Japan", Asian Wall Street Journal, 13 July 1982.

  Interview with Mukhriz Mahathir, 22 March 2007.

  Jomo K.S., M Way: Mahathir's Economic Legacy (Kuala Lumpur: Forum, 2003), p.34.

  Raphael Pura, "Malaysia Builders Hit Japan Dominance", Asian Wall Street Journal, 8 March 1984.

  Jomo K.S., M Way, p. 43.

  Raphael Pura, "Malaysia's 'Look East' Policy Fails to Solve Some Disputes with Japan", Asian Wall Street Journal, 8 March 1984.

  Mahathir Mohamad, "The Second Opening of Japan", in M Way, p. 52.

  Jomo K.S., M Way, p. 50.

  Ibid., p. 51.

  Ibid., p. 60.

  Ibid., p. 70.

  R.S. Milne and Diane K. Mauzy, Malaysian Politics Under Mahathir (London: Routledge, 1999), pp. 64-65.

  Mahathir Mohamad, speech at the Seminar on Transnational Corporations and National Development, 2 October 1979, cited in Khoo Boo Teik, Paradoxes of Mahathirism, p. 119.

  Mahathir Mohamad, speech at the Top Leaders Conference on National Economic Development, 18 May 1984, cited in Khoo Boo Teik, Paradoxes of Mahathirism, pp. 119-120.

  Star, 2 February 1982, cited in Khoo Boo Teik, Paradoxes of Mahathirism, p. 120.

  Jomo K.S., M Way, p. 70.

  Ibid., p. 71.

  Raphael Pura, "New Doubts Arise Over Mahathir's Industrial Brainchild", Asian Wall Street Journal, 10 June 1983.

  Raphael Pura, "Malaysia Gambles in Exporting Saga Car", Asian Wall Street Journal, 14 January 1987.

  Ibid.

  Jomo K.S., M Way, p. 85.

  Leslie Lopez, "Malaysia to Lower Car-Import Tariffs", Asian Wall Street Journal, 10 November 2004.

  Halinah Todd, "The Proton Saga Saga", New Internationalist, No. 195 (May 1989), pp. 14-15.

  Anwar Ibrahim, speaking to journalists in Singapore, 21 May 2008.

  Leslie Lopez, "Mitsubishi Sells Proton Shares", Asian Wall Street Journal, 9 March 2004.

  Raphael Pura, "Malaysia Still Will Cut Government Role", Asian Wall Street Journal, 30 August 1983.

  Ibid.

  "Tengku Razaleigh Responds to Dr Mahathir's Allegations against Him", Aliran Monthly, 1994: 11, p. 36.

  Zainuddin Maidin, The Other Side of Mahathir (Kuala Lumpur: Utusan Publications & Distributors Sdn. Bhd., 1994), pp. 6-7.

  Lorraine Carlos Salazar, "'First Come, First Served': Privatization Under Mahathir", in Reflections, p. 284.

  Interview with Mahathir Mohamad, 14 August 2007.

  Agence France-Presse, Reuters, "KL Spent $4.8b on Bailouts of Companies in Past 5 Years", Straits Times, 15 December 2006.

  Lorraine Carlos Salazar, "'First Come, First Served': Privatization Under Mahathir", p.287.

  Mohamed Ariff and Syarisa Yanti Abubakar, "Strengthening Entrepreneurship in Malaysia", Malaysian Institute of Economic Research, 2003, p. 4.

  Jeff Tan, Privatization in Malaysia: Regulation, Rent-seeking and Policy Failure (London: Routledge, 2008), pp. 58-60.

  Leslie Lopez, "A Bit Stretched", Far Eastern Economic Review, 1 July 2004, http://www.feer.com/articles/2004/0407_0l/henry.html (accessed 19 January 2006).

  Lorraine Carlos Salazar, "'First Come, First Served': Privatization Under Mahathir", p.288.

  Agence France-Presse, Reuters, "KL Spent $4.8b on Bailouts of Companies in Past 5 Years".

  Bank Negara Malaysia.

  Edmund Terence Gomez and Jomo K.S., Malaysia's Political Economy: Politics, Patronage and Profits (Cambridge: Cambridge University Press, 1999 edition), p.41.

  Peter Searle, The Riddle of Malaysian Capitalism: Rent-seekers or Real Capitalists? (Sydney: Asian Studies Association of Australia with Allen & Unwin and University of Hawai'i Press, 1999), p. 59.

  Khoo Boo Teik, Beyond Mahathir: Malaysian Politics and its Discontents (London: Zed Books Ltd., 2003), p. 42.

  Ibid., p. 45.

  Lee Kuan Yew, From Third World to First: The Singapore Story: 1965-2000 (Singapore: Times Media Pte. Ltd., 2000), p. 289.

  Jairam Ramesh, "Mahathir's Mantra", India Today on the Net, 21 May 2001, http://www.india-today.com/itoday/20010521/jairam.shtml (accessed 1 June 2006).

  Lee Hwok Aun, "The NEP, Vision 2020, and Dr. Mahathir: Continuing Dilemmas", p.273.

  Halim Salleh, "Development and the Politics of Social Stability in Malaysia", Southeast Asian Affairs 1999, p. 189.

  Ibid., p. 190.

  Stephen Duthie, "The Asian Economist", Asian Wall Street Journal, 12 November 1992.

  Jomo K.S., M Way, p. 180.

  Ibid., p. 183.

  Ibid., p. 182.

  Ibid., p. 188.

  Khoo Boo Teik, Beyond Mahathir, p. 47.

  Jomo K.S., M Way, p. 187.

  Khoo Boo Teik, Beyond Mahathir, p. 49.

  Maggie Farley, "Malaysian Leader, Soros Trade Barbs", Los Angeles Times, 22 September 1997, http://articles.latimes.com/p/1997/sep/22/business/fi-34969 (accessed 24 March 2009). After he retired, Dr. Mahathir met with Soros in Kuala Lumpur and accepted that the financier was not responsible for the Asian financial crisis. "Malaysia's Former Leader Mahathir Buries the Hatchet with Financier George Soros", China Post, 15 December 2006, http://www.chinapost.com.tw/headlines/print/43088.htm (accessed 24 March 2009).

  Jomo K.S., M Way, p. 186.

  Ibid., p. 187.

  Raphael Pura, "Confidence Crisis: Tough Talk by Mahathir Rattles Overseas Investors", Asian Wall Street Journal, 2 September 1997.

  Khoo Boo Teik, Beyond Mahathir, p. 64.

  In separate interviews, they gave conflicting accounts of Daim's departure. Dr. Mahathir said he tired of defending Daim against accusations of corruption, "And I decided that, I told him, look, it's better if he resigns" (20 March 2007). Daim said he resigned because he had told Dr. Mahathir at the outset he was taking the post for a limited time. His resignation, he said, left Dr. Mahathir without his closest political ally after the uproar over Anwar's dismissal and the setbacks in the 1999 election. "If I left...he would be alone. But he has to explain why I leave" (18 October 2007).

  Lorraine Carlos Salazar, "'First Come, First Served': Privatization Under Mahathir", p.289.

  Poverty figures are official, cited in Ragayah Mat Zin, "Malaysia: Poverty and Income Inequality – Prospects and Challenges Under the Ninth Malaysia Plan", paper delivered to conference on the Malaysian economy, organized by the Institute of Southeast Asian Studies, Singapore, 25-26 January 2007.

  Beh Lih Yi, "Bumi Equity Hit NEP Target 10 Years Ago", 1 November 2006, http://www.malaysiakini.com/news/58885 (accessed 31 August 2008).

  Koon Yew Yin, "What is Wrong with the NEP", Aliran Monthly, 2006: 9, pp. 34, 40.

  Ragayah Mat Zin, "Malaysia: Poverty and Income Inequality – Prospects and Challenges Under the Ninth Malaysia Plan".

  Lee Hwok Aun, "The NEP, Vision 2020, and Dr. Mahathir: Continuing Dilemmas", p.276.

  G. Lin, "Debating an Equitable Malaysia: Towards an Alternative Economic Agenda", Aliran Monthly, 2005: 8, pp. 7-10.

  Figures from the Ninth Malaysia Plan cited by Lim Guan Eng, secretary general of the Democratic Action Party, in a speech to the DAP Economic Forum, "NEP vs. Vision 2020: Where Has All the Money Gone?", 26 September 2006.

  Bridget Welsh, "Mahathir's Legacy: A New Society?", in Reflections, p. 361.

  Lee Hock Guan, "Affirmative Action in Malaysia", Southeast Asian Affairs 2005, p.221.

  Ibid., p. 221.

  Although the ethnic admission quota system for local public universities was dropped in favour of a merit-based system in 2001, non-bumiputras remained skeptical of the new policy since Chinese and Indian student intakes fell sharply.

  Abdul Rahman Embong, State-led Modernization and the New Middle Class in Malaysia (New York: Palgrave, 2002), p. 41.

  Lee Hock Guan, "Affirmative Action in Malaysia", p. 214.

  Abdul Rahman Embong, State-led Modernization and the New Middle Class in Malaysia, p. 56.

  Edmund Terence Gomez, "The Perils of Pro-Malay Policies", Far Eastern Economic Review, Se
ptember 2005, p. 39.

  Justin Doebele, "Malaysia's 40 Richest", Forbes Asia, 5 June 2006, pp. 35-38.

  Christopher Adam and William Cavendish, "Background", in Jomo K.S., ed., Privatizing Malaysia: Rents, Rhetoric, Realities (Boulder and London: Westview Press, 1995), p. 15.

  Bridget Welsh, "Mahathir's Legacy: A New Society?", p. 363.

  Ibid., p. 363.

  Ibid., p. 364.

  Halim Salleh, "Development and the Politics of Social Stability in Malaysia", Southeast Asian Affairs 1999, p. 188.

  Lee Hock Guan, "Affirmative Action in Malaysia", p. 216.

  * * *

  (5)

  A Volatile Mix of Business and Politics

  Before Dr. Mahathir became president of UMNO, the party dabbled in business to keep the media in friendly hands and generate income to cover operating expenses. Dr. Mahathir plunged UMNO deep into the corporate world, in partnership with Daim Zainuddin, his wealthy and most trusted business operative, whom he made UMNO treasurer. They turned the party into a vast conglomerate, with investments that spanned almost the entire economy, inducing a profound change in the nature and role of UMNO.

  The key to UMNO's transformation was Malaysia's affirmative action programme to eliminate poverty and assist bumiputras. While devised to reduce inequality, it was often applied by the Mahathir administration in a way that enriched a political elite, whose common attribute was an intimate relationship with UMNO. The mandatory 30 per cent of share allocation for bumiputras during a company's public listing, or restructuring, was usually channeled to UMNO-owned or -linked corporate entities and other party allies. With privatization, too, UMNO was used as a vehicle to transfer government holdings to private or semi-private ownership, mostly for the benefit of the same clique.